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ACCA Applied Skills · Corporate and Business Law (Global) · The formation and constitution of a company

Sable Co's board resolves that its finance director, Anil, may sign contracts for the company only with the chair's written consent. Anil, without consent, signs a contract to buy equipment from Tech Ltd. Tech Ltd has never heard of the consent rule, but Anil had previously signed similar contracts without objection from the board. Which TYPE of authority is Tech Ltd most likely to rely on?

Tech Ltd would rely on apparent authority. The board allowed Anil to sign similar contracts before, which represented that he could act for the company, and Tech Ltd was unaware of the consent requirement. Actual authority, express or implied, was removed by the restriction.

  1. AExpress actual authority
  2. BImplied actual authority arising from the company's constitution
  3. CApparent authority arising from the board's past conductCorrect

Explanation

Anil lacked express actual authority, since consent was required, and the board's restriction removes implied actual authority too. Tech Ltd can rely on apparent authority, based on the company's representation by letting Anil sign similar contracts previously without objection.

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